EXHIBIT 5(a)
ADVISORY AGREEMENT
AGREEMENT made as of the 21st day of September, 1990 between
USAA INVESTMENT MANAGEMENT COMPANY, a corporation organized under
the laws of the State of Delaware and having a place of business
in San Antonio, Texas (the "Manager"), and USAA MUTUAL FUND,
INC., a corporation organized under the laws of the State of
Maryland and having a place of business in San Antonio, Texas
(the "Company").
WHEREAS, the Company is engaged in business as an open-end
management investment company and is so registered under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Manager is engaged principally in the business
of rendering investment management services and is registered
under the Investment Advisers Act of 1940, as amended; and
WHEREAS, the Company is authorized to issue shares of capital
stock (the "Shares") in separate classes with each such class
representing interests in a separate portfolio of securities and
other assets; and
WHEREAS, the Company presently offers Shares in five classes
designated as the Growth Fund, Aggressive Growth Fund, Income
Stock Fund, Income Fund and Money Market Fund (the "Existing
Funds") (such classes, together with all other classes
subsequently established by the Company with respect to which the
Company desires to retain the Manager to render investment
advisory services hereunder and with respect to which the Manager
is willing so to do, being herein collectively referred to as the
"Funds");
NOW, THEREFORE, WITNESSETH: That it is hereby agreed between
the parties hereto as follows:
1. APPOINTMENT OF MANAGER.
(a) Existing Funds. The Company hereby appoints the Manager
to act as manager and investment adviser to each of the
Existing Funds for the period and on the terms herein set
forth. The Manager accepts such appointment and agrees to
render the services herein set forth, for the compensation
herein provided.
(b) Additional Funds. In the event that the Company
establishes one or more classes of Shares other than the
Existing Funds with respect to which it desires to retain the
Manager to render management and investment advisory services
hereunder, it shall so notify the Manager in writing. If the
Manager is willing to render such services it shall notify
the Company in writing, whereupon the Company shall appoint
the Manager to act as manager and investment adviser to each
of such classes of shares for the period and on the terms
herein set forth, the Manager shall accept such appointment
and agree to render the services herein set forth for the
compensation herein provided, and each of such classes of
Shares shall become a Fund hereunder.
2. DUTIES OF MANAGER.
The Manager, at its own expense, shall furnish the following
services and facilities to the Company:
(a) Investment Program. The Manager will (i) furnish
continuously an investment program for each Fund, (ii)
determine (subject to the overall supervision and review of
the Board of Directors of the Company) what investments shall
be purchased, held, sold or exchanged by each Fund and what
portion, if any, of the assets of each Fund shall be held
uninvested, and (iii) make changes on behalf of the Company
in the investments of each Fund. The Manager will also
manage, supervise and conduct the other affairs and business
of the Company and of each Fund thereof and matters
incidental thereto, subject always to the control of the
Board of Directors of the Company and to the provisions of
the Company's Articles of Incorporation and Bylaws and the
1940 Act.
(b) Regulatory Reports. The Manager shall furnish to the
Company necessary assistance in:
(i) The preparation of all reports now or hereafter required
by Federal or other laws.
(ii) The preparation of Prospectuses, Registration Statements,
and amendments thereto that may be required by Federal or other
laws or by the rules or regulations of any duly authorized
commission or administrative body.
(c) Office Space, Facilities, and Personnel. The Manager
shall furnish to the Company office space in the offices of
the Manager or in such other place or places as may be agreed
upon from time to time, and all necessary office facilities,
simple business equipment, supplies, utilities, telephone
service and accounting services (in addition to those
provided by the custodian and transfer agent) for managing
the affairs and investments of the Company. These services
are exclusive of the necessary records of any dividend
disbursing agent, transfer agent, registrar or custodian.
The Manager shall compensate all personnel, officers, and
Directors of the Company if such persons are also officers or
employees of the Manager or its affiliates.
(d) Fidelity Bond. The Manager shall provide and maintain a
bond issued by a reputable insurance company authorized to do
business in the place where the bond is issued, against
larceny and embezzlement covering each officer and employee
of the Company who may singly or jointly with others have
access to funds or securities of the Company, with direct or
indirect authority to draw upon such funds or to direct
generally the disposition of such funds. The bond shall be
in such reasonable amount as a majority of the Board of
Directors of the Company who are not officers or employees of
the Company shall determine, with due consideration to the
aggregate assets of the Company to which any such officer or
employee may have access.
3. ALLOCATION OF EXPENSES.
Except for the services and facilities to be provided by the
Manager set forth in Paragraph 2 above, the Company assumes and
shall pay all expenses for all other Company operations and
activities and shall reimburse the Manager for any such expenses
incurred by the Manager. The expenses to be borne by the Company
shall include, without limitation:
(a) the charges and expenses of any registrar, share transfer
or dividend disbursing agent, custodian, or depository
appointed by the Company for the safekeeping of its cash,
portfolio securities and other property;
(b) the charges and expenses of auditors;
(c) brokerage commissions for transactions in the portfolio
securities of the Company;
(d) all taxes, including issuance and transfer taxes, and fees
payable by the Company to Federal, state or other
governmental agencies;
(e) the cost of share certificates representing Shares of the Company;
(f) fees involved in registering and maintaining registrations
of the Company and of its Shares with the Securities and Exchange
Commission and various states and other jurisdictions;
(g) all expenses of shareholders' and Directors' meetings and
of preparing, printing and mailing proxy statements,
quarterly reports, semiannual reports, annual reports and
other communications (including Prospectuses) to existing shareholders;
(h) compensation and travel expenses of Directors who are not
"interested persons" within the meaning of the 1940 Act;
(i) the expense of furnishing or causing to be furnished to
each shareholder a statement of his account, including the
expense of mailing;
(j) charges and expenses of legal counsel in connection with
matters relating to the Company, including, without
limitation, legal services rendered in connection with the
Company's legal and financial structure and relations with
its shareholders, issuance of Company Shares, and
registration and qualification of securities under Federal,
state and other laws;
(k) membership or association dues for the Investment Company
Institute or similar organizations;
(l) interest payable on Company borrowings; and
(m) postage.
4. ADVISORY FEE.
(a) For the services and facilities to be provided by the
Manager as provided in Paragraph 2 hereof, the Company shall
pay to the Manager a monthly fee with respect to the Growth
Fund computed as a percentage of aggregate average net assets
of such Fund, which on an annual basis is equal to three-
fourths of one percent (.75%) of the Monthly Average Net
Assets (defined below) of such Fund for such calendar month.
(b) For the services and facilities to be provided by the
Manager as provided in Paragraph 2 hereof, the Company shall
pay to the Manager a monthly fee with respect to the Aggressive
Growth Fund computed as a percentage of aggregate average net
assets of such Fund, which on an annual basis is equal to:
(1) one-half of one percent (.50%) on an annual basis of the
first $200,000,000 of the Monthly Average Net Assets (defined
below) of such Fund for such calendar month;
(2) two-fifths of one percent (.40%) on an annual basis for
that portion of Monthly Average Net Assets in excess of
$200,000,000 and not over $300,000,000 of such Fund for such
calendar month; and
(3) one-third of one percent (1/3%) for the portion of such
Monthly Average Net Assets of such Fund in excess of $300,000,000.
(c) For the services and facilities to be provided by the
Manager as provided in Paragraph 2 hereof, the Company shall
pay to the Manager a monthly fee with respect to the Income
Stock Fund computed as a percentage of aggregate average net
assets of such Fund, which on an annual basis is equal to
one-half of one percent (.50%) of the Monthly Average Net
Assets (defined below) of such Fund for such calendar month.
(d) For the services and facilities to be provided by the
Manager as provided in Paragraph 2 hereof, the Company shall
pay to the Manager a monthly fee with respect to the Income
Fund and Money Market Fund computed as a percentage of
aggregate average net assets of each Fund, which on an annual
basis is equal to twenty-four one-hundredths of one percent
(.24%) of all Monthly Average Net Assets (defined below) of
each Fund for such calendar month.
(e) The "Monthly Average Net Assets" of any Fund of the
Company for any calendar month shall be equal to the quotient
produced by dividing (i) the sum of the net assets of such
Fund, determined in accordance with procedures established
from time to time by or under the direction of the Board of
Directors of the Company in accordance with the Articles of
Incorporation of the Company, as of the close of business on
each day during such month that such Fund was open for
business, by (ii) the number of such days.
(f) The Manager may from time to time and for such periods as
it deems appropriate voluntarily waive fees or otherwise
reduce its compensation hereunder.
5. EXPENSE LIMITATION.
In the event that expenses of any Fund of the Company for any
fiscal year should exceed the expense limitation on investment
company expenses imposed by any statute or regulatory authority
of any jurisdiction in which shares of the Company are qualified
for offer and sale, the compensation due the Manager for such
fiscal year with respect to such Fund shall be reduced by the
amount of such excess by a reduction or refund thereof. In the
event that the expenses of any Fund exceed any expense limitation
which the Manager may, by written notice to such Fund,
voluntarily declare to be effective subject to such terms and
conditions as the Manager may prescribe in such notice, the
compensation due the Manager shall be reduced, and, if necessary,
the Manager shall assume expenses of such Fund, to the extent
required by such expense limitation.
In the event this Agreement is terminated with respect to any
one or more Funds as of a date other than the last day of the
fiscal year of the Company, the Manager shall pay the Company a
pro rata portion of the amount that the Manager would have been
required to pay, if any, had this Agreement remained in effect
for the full fiscal year.
6. COMPANY TRANSACTIONS.
In connection with the management of the investment and
reinvestment of the assets of the Company, the Manager, acting by
its own officers, directors or employees or by a duly authorized
subcontractor, is authorized to select the brokers or dealers
that will execute purchase and sale transactions for the Company
and is directed to use its best efforts to obtain the best
available price and most favorable execution with respect to all
such purchases and sales of portfolio securities for the Company.
Subject to this primary requirement, and maintaining as its first
consideration the benefits to the Company and its shareholders,
the Manager shall have the right, subject to the control of the
Board of Directors, to follow a policy of selecting brokers and
dealers who furnish statistical, research and other services to
the Company or to the Manager.
The Manager agrees that neither it nor any of its officers or
directors will take any long or short position in the capital
stock of the Company; provided, however, that such prohibition:
(a) shall not prevent the Manager from purchasing shares of
the capital stock of the Company if orders to purchase such
shares are placed upon the receipt by the Manager of purchase
orders for such shares and are not in excess of such purchase
orders received by the Manager; and
(b) shall not prevent the purchase of shares of capital stock
of the Company by any of the persons above described for
their account and for investment at the price at which such
shares are available to the public at the time of purchase or
as part of the initial capital of the Company.
7. RELATIONS WITH COMPANY.
Subject to and in accordance with the Articles of
Incorporation and Bylaws of the Company and of the Manager,
respectively, it is understood that Directors, officers, agents
and shareholders of the Company are or may be interested in the
Manager (or any successor thereof) as directors, officers, or
otherwise, that directors, officers, agents and shareholders of
the Manager are or may be interested in the Company as Directors,
officers, shareholders or otherwise, that the Manager (or any
such successor) is or may be interested in the Company as a
shareholder or otherwise and that the effect of any such interests
shall be governed by said Articles of Incorporation and Bylaws.
8. LIABILITY OF MANAGER.
No provision of this Agreement shall be deemed to protect the
Manager against any liability to the Company or its shareholders
to which it might otherwise be subject by reason of any willful
misfeasance, bad faith or gross negligence in the performance of
its duties or the reckless disregard of its obligations and
duties under this Agreement. Nor shall any provision hereof be
deemed to protect any Director or officer of the Company against
any such liability to which he might otherwise be subject by
reason of any willful misfeasance, bad faith or gross negligence
in the performance of his duties or the reckless disregard of his
obligations and duties. If any provision of this Agreement shall
be held or made invalid by a court decision, statute, rule or otherwise,
the remainder of this Agreement shall not be affected thereby.
9. DURATION AND TERMINATION OF THIS AGREEMENT.
(a) Duration. This Agreement shall be executed on the first
date upon which the Agreement shall have been approved by a
majority of the outstanding voting securities (as that term
is defined in the ▇▇▇▇ ▇▇▇) of any Existing Fund. This
Agreement shall become effective with respect to any Existing
Fund on the date upon which the Agreement shall have been
approved by a majority of the outstanding voting securities
(as that term is defined in the ▇▇▇▇ ▇▇▇) of such Existing
Fund, and with respect to any additional Fund on the date of
receipt by the Company of notice from the Manager in
accordance with Paragraph 1(b) hereof that the Manager is
willing to serve as Manager with respect to such Fund.
Unless terminated as herein provided, this Agreement shall
remain in full force and effect with respect to each Existing
Fund through June 30, 1991 and, with respect to each
additional Fund, through the first June 30 occurring more
than twelve months after the date on which such Fund becomes
a Fund hereunder, and shall continue in full force and effect
for periods of one year thereafter with respect to each Fund
so long as such continuance with respect to any such Fund is
approved at least annually (a) by either the Directors of the
Company or by vote of a majority of the outstanding voting
shares (as defined in the ▇▇▇▇ ▇▇▇) of such Fund, and (b) in
either event by the vote of a majority of the Directors of
the Company who are not parties to this Agreement or
"interested persons" (as defined in the ▇▇▇▇ ▇▇▇) of any such
party, cast in person at a meeting called for the purpose of
voting on such approval.
Any approval of this Agreement by the holders of a majority
of the outstanding shares (as defined in the ▇▇▇▇ ▇▇▇) of any
Fund shall be effective to continue this Agreement with
respect to any such Fund notwithstanding (A) that this
Agreement has not been approved by the holders of a majority
of the outstanding shares of any other Fund affected thereby,
and (B) that this Agreement has not been approved by the vote
of a majority of the outstanding shares of the Company,
unless such approval shall be required by any other
applicable law or otherwise.
(b) Termination. This Agreement may be terminated at any
time, without payment of any penalty, by vote of the
Directors of the Company or by vote of a majority of the
outstanding shares (as defined in the 1940 Act), or by the
Manager on sixty (60) days' written notice to the other party.
(c) Automatic Termination. This Agreement shall automatically
terminate in the event of its assignment.
10. NAME OF COMPANY.
It is understood that the name "USAA," and any logo
associated with that name, is the valuable property of the United
Services Automobile Association, and that the Company has the
right to include "USAA" as a part of its name only so long as
this Agreement shall continue and the Manager is a wholly owned
subsidiary of the United Services Automobile Association. Upon
termination of this Agreement the Company shall forthwith cease
to use the "USAA" name and logo and shall submit to its
shareholders an amendment to its Articles of Incorporation to
change the Company's name.
11. PRIOR AGREEMENT SUPERSEDED.
This Agreement supersedes any prior agreement relating to the
subject matter hereof between the parties.
12. SERVICES NOT EXCLUSIVE.
The services of the Manager to the Company hereunder are not
to be deemed exclusive, and the Manager shall be free to render
similar services to others so long as its services hereunder are
not impaired thereby.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first set forth above.
USAA MUTUAL FUND, INC. USAA INVESTMENT MANAGEMENT
COMPANY
By:/s/ ▇▇▇▇▇▇▇ ▇. ▇. ▇▇▇▇ By:/s/ ▇▇▇▇▇▇▇ ▇. ▇. ▇▇▇▇
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President President
ATTEST: ATTEST:
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Secretary Secretary
EXHIBIT 5(b)
USAA Investment Management Company
USAA Building
San Antonio, TX 78288
Gentlemen:
Pursuant to Section 1(b) of the Advisory Agreement dated as
of September 21, 1990 between USAA Mutual Fund, Inc. (the
"Company") and USAA Investment Management Company (the
"Manager"), please be advised that the Company has established
two new series of its shares, namely, the Short-Term Bond Fund
and the Growth & Income Fund (the "Funds"), and please be further
advised that the Company desires to retain the Manager to render
management and investment advisory services under the Advisory
Agreement to the Funds at the fees stated below:
Advisory Fee Schedule
Twenty-four one hundredths of one percent (.24%) of the
aggregate average net assets of the Short-Term Bond
Fund and sixty one hundredths of one percent (.60%) of
the aggregate average net assets of the Growth & Income
Fund.
Please state below whether you are willing to render such
services at the fees stated above.
USAA MUTUAL FUND, INC.
Attest:/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By:/s/ ▇▇▇▇▇▇▇ ▇. ▇. ▇▇▇▇
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Secretary President
Dated: June 1, 1993
We as the sole shareholder of the above named Funds, do
hereby approve the Advisory Service Agreement and are willing to
render management and investment advisory services to the Short-
Term Bond Fund and the Growth & Income Fund and the fees stated above.
USAA INVESTMENT MANAGEMENT
COMPANY
Attest:/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By:/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
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Assistant Secretary Senior Vice President
Dated: June 1, 1993
